Since LPPI was established in 2016, the business has achieved £74m net savings, and £28.2m in net savings in past year alone (to 31 March 2021)

The savings come from economies of scale, buying power and investment performance

Local Pensions Partnership Investments (“LPPI”) today announces that it has made £28.2m in net cost savings for clients in the year to March 2021, bringing the overall total savings to £74m since inception in 2016. These savings put LPPI on track to deliver over £186m by 2025, £327m by 2030 and £468m by 2035.

The money saved has come through the economies of scale that LPPI’s pooling model has created, including allowing access to more cost-effective assets in private markets, increasing buying power to negotiate fund manager discounts, and internal management.

Indeed, a key element of LPPI’s model is the internal management of assets. LPPI currently manages over half of the LPPI Global Equities Fund in-house. The company also invests client assets directly in infrastructure through the LPPI Infrastructure Fund and via GLIL Infrastructure. LPPI’s plan is to incrementally grow the in-house investment team.

Clients have also benefited from long-term benchmark beating investment performance. Excess returns have the potential to provide benefits which amount to several multiples of the net cost savings.

LPPI, a £22.1bn assets under management (to 30 September 2021) FCA-regulated entity, has launched eight investment funds covering most asset classes, including equities, fixed income and infrastructure, with 100% of assets from client funds transitioned, and managed largely via these efficient and effective vehicles.

Cost savings are the big driver of pension pooling. But pooling is also designed to improve governance, increase access to asset classes such as infrastructure and other private assets which can be hard to access for smaller funds. Scale also brings significant opportunity to coordinate and deliver responsible investments outcomes. On these:

LPPI is committed to strong corporate governance, managed with a tailored governance framework with a strong stakeholder focus

Clients have benefited from LPPI’s specialism in infrastructure and real estate thanks to its real assets portfolios

LPPI has been increasing its influence and investment in responsible investment through prioritising collaborative engagement over divestment, and through its signing of the UK Stewardship Code and the UN-backed Principles for Responsible Investment and has adopted the Task Force on Climate-related Financial Disclosures recommendations

LPPI also made a public commitment to the goal of net zero portfolio emissions by 2050 guided by the Institutional Investors Group on Climate Change Net Zero Investment Framework and the IIGCC Net Zero Asset Manager Commitment.

Chris Rule, CEO, LPPI and LPP Group, says:

“The value of pooling stretches far beyond cost reductions, but these figures are strong evidence for the success of pooling, and its long-term future as a vehicle for paying public sector pensions.

“A key part of our model is internally managing the assets and offering a tailored range of investment options to support strategic asset allocation as we help clients manage their liabilities, which stretch out into the very long term.”

Notes:

LPPI forecasts are based on no less than £28.2m annual net cost savings to 2035